RAKBank's fourth-quarter profit surges 52% fuelled by higher income

Lender reports net profit of more than $117m for the October-December period

RAKBank's operating income surged 15 per cent in the last quarter. Photo: RAKBank

National Bank of Ras Al Khaimah reported a 51.6 per cent surge in its fourth-quarter net profit driven by higher interest and non-interest income.

The lender reported a net profit after tax of Dh430.9 million ($117.32 million) in the October-December period, RAKBank said on Monday in a filing to the Abu Dhabi Securities Exchange, where its shares are traded.

Operating income of the bank surged nearly 15 per cent to more than Dh1 billion in the September quarter.

The bank said its net profit for the full financial year jumped 53.4 per cent to nearly Dh1.8 billion, while operating income during the period increased about 30 per cent to exceed Dh4.4 billion.

RAKBank said its 2023 profit was propelled by various factors including net interest income that grew 34 per cent to Dh3.3 billion, supported by a robust fee income of Dh1.1 billion, up 17.8 per cent.

The bank's total assets stood at Dh74 billion as of December, compared with Dh66.3 billion at the end of the previous year. Its cash and cash equivalents reached Dh7.9 billion last year, increasing by Dh1.4 billion against December 2022.

“We see 2024 as a year full of opportunities, albeit challenging,” RAKBank chairman Mohammad Alshamsi said.

“While the broader global environment will create headwinds, we have confidence in the strength of the UAE economy. The country continues to see strong growth driven by key initiatives … including ongoing economic diversification initiatives, progressive immigration policy, and reforms in business ownership.”

The sharp economic rebound in the broader region and the UAE is expected to continue to support banking sector profitability.

The UAE Central Bank has increased its 2024 growth forecast for the country's economy to 5.7 per cent, from 4.3 per cent previously, due to an expected rise in oil production next year.

Banks have also benefitted from higher interest rates as central banks increase benchmark rates to stem inflation.

The UAE Central Bank increased the policy rates by 25 basis points in the third quarter of last year, following a 25-basis point increase by the US Federal Reserve.

Customer deposits at RAKBank jumped 12.3 per cent on an annual basis to Dh50.4 billion in 2023, the lender said on Monday.

In personal banking, RAKBank experienced strong momentum across key products, including an increase of 19 per cent in its credit card spends, it said. Wholesale banking constituted nearly 28 per cent of the bank’s total loans and advances.

"We continue to diversify our balance sheet, reduce our risk profile and add on new value-added products and services for our customers … the bank remains well capitalised, delivering strong shareholder returns and having one of the highest provision coverage ratios in the industry,” Raheel Ahmed, group chief executive of RAKBank, said.

"We continue to focus on offering our customers a personalised and brilliant experience with the introduction of digital capabilities across account opening and credit card applications.”

Last year, digital transactions surged 13 per cent on a yearly basis while the bank reported a 68 per cent digital share of new account opening.

The bank’s operating expenses increased by Dh165.9 million with higher performance and volume-related costs, RAKBank said.

The lender more than doubled its capital expenditure to Dh165.4 million as it continued to invest in “key foundation pillars while enhancing our digital and technological capabilities”.

The banking sector in the Emirates is well capitalised with adequate liquidity buffers and remained resilient against the risk of stagflation and market uncertainties in a stress-testing exercise, the Central Bank said in July.